Heavyweights

07.23.12

Oligarch v. Oligarch: London's Courts Attract Litigious Tycoons

The London courts become ground-zero for tycoons looking to air rivals' dirty laundry

Roman Abramovich, the Russian oil and steel tycoon, is one of the world's richest men. He built his empire in the perestroika days, when Russia was a new and often violent capitalism frontier. Like many of his peers in the pack of oligarchs that emerged from that era, Abramovich now spends much of his time living a life of luxury in London. He can often be found in the owner's box of the Chelsea football club, which he purchased in 2003.

One fall afternoon in 2007, Abramovich was shopping along the city's exclusive Sloane Street when a rival from the old days spied him from the Dolce & Gabbana down the way. Boris Berezovsky, a bald and stocky man who made his own fortune in oil and media, had once counted himself among Abramovich's friends and business partners before the two apparently had a bitter falling-out. He made a beeline for Abramovich, who took cover inside a Hermès store and had his bodyguards block the door. A scuffle between rival entourages ensued, and in the confusion Berezovsky slipped inside. Confronting Abramovich at last, he reached into his pocket, as security cameras rolled. "I've got a present for you," he reportedly said.

In his hand Berezovsky held a writ of court. Abramovich, after spending months avoiding the summons, had finally been served.

In the years since, London has played host to a court drama of the highest order. In a massive $5 billion lawsuit that has gripped the British tabloids and the international press, Berezovsky alleged that Abramovich "betrayed" and "intimidated" him out of billions of dollars in oil shares, while Abramovich countered that Berezovsky was not a business partner but a political godfather who provided krysha, the murky protection and political fixing that was common during the Yeltsin era. There were tales of luxury cruises and off-shore firms, along with grim portrayals of the seedy underbelly of the Russian business world. Even Russian president Vladimir Putin, another Berezovsky ally-turned-foe, who has his own connections to Abramovich, was drawn into the mix. "He hovers over the proceedings like a scowling ghost," wrote Luke Harding, a correspondent for the Guardian.

The trial finished in January, but the much-anticipated judgment is expected any day-and it's keeping many London legal insiders on the edge of their seats. "It's going to make for a cracking read," says Alastair Shaw, a London-based lawyer who specializes in Russian disputes.

"These oligarchs like to dress well, they like fancy cars, they have houses in the south of France. And if there are lawsuits, they like them to be in the London courts."

It's not just grandiose story lines that have people like Shaw so intrigued. Berezovsky v. Abramovich is the highest-profile (and highest-paying) case to date in a London legal trend that only seems to keep gaining steam. An estimated 60 percent of the cases in England's commercial and chancery courts now have ties to Russia or other former Soviet bloc countries--including many that involve oligarchs like Abramovich and Berezovsky, who have long-standing grudges and are making London their arena of choice in which to battle things out. English lawyers like to point out that their courts are incorruptible, in contrast to a Russian system that is often described as being open to influence, both political and financial, especially where the biggest fish are concerned. But it also seems to be a sort of fashion statement among oligarchs these days. "It's almost like a designer tie," says Brian Zimbler, one of the longest-practicing Western lawyers in Moscow. "These oligarchs like to dress well, they like fancy cars, they have houses in the south of France. And if there are lawsuits, they like them to be in the London courts."

The London legal scene has been happy to oblige. Competition for oligarch clients is fierce, and the firms who win them are raking in record fees. (The fee for Abramovich's lead counsel is rumored to be between $4.7 million and $15 million, an astronomical price tag even at the lower end.) Meanwhile, booming cottage industries have sprung up for things like Russian court translators and paralegals specializing in Russian law. This has been a boon to a struggling economy that has seen law as one of the few sources of growth-legal services accounted for 1.8 percent of Britain's GDP in 2009.

As British courts compete with locales from Shanghai and Singapore to New York, the Ministry of Justice has actively promoted England as a hub for international disputes-with an emphasis on Russia and the former Soviet bloc countries, now known collectively as the Commonwealth of Independent States (CIS). There have been English law weeks in Moscow and British Law Society conferences in Kazakhstan. Meanwhile, the sparkling Rolls Building in London, which handles the bulk of England's commercial cases, is often bustling with CIS disputes. When Bruce W. Bean, a professor at Michigan State University who is considered one of the world's leading experts on Russian law, traveled to the Rolls Building last year as an expert witness in the Abramovich case, he found himself surrounded by simultaneous translation and high-tech computer screens. "That courtroom was the most impressive thing I have ever seen," he says. "There were three Russian-language trials going on, on the same floor."

And so oligarchs in London must stay on the alert for writs, on occasion from one another. ("Sometimes oligarchs try to serve other oligarchs," one CIS lawyer in London says.) Private investigators are employed to track oligarchs' time in London, in hopes of making the case for residency, which allows jurisdiction in English courts-by British standards, just a few weeks in town annually can be enough to make the case. Even divorce lawyers in on the CIS game. This promises more high-profile cases on the way, often featuring the headline-grabbing marriage of brass-knuckle Russian businessmen and the British high society scene. "The docket looks full for years to come," Shaw says.

Last week, the latest high-profile case kicked off in the Rolls Building, where Oleg Deripaska, another one of Russia's richest men, can expect to spend months defending himself in sprawling civil trial that has already announced more than 70 witnesses (with Abramovich among them), at least one of whom has been granted anonymity. Deripaska, who keeps a mansion in Belgravia, gained notoriety in Britain when he was caught in 2008 hosting George Osborne, the current chancellor, on his Corfu yacht. He also counts the playboy financier Nat Rothschild and Blairite heavyweight Peter Mandelson among his circle of acquaintances.

In the past, Deripaska has reportedly been barred from traveling to the U.S. due to American concerns over his possible ties to organized crime in Russia. A representative for Deripaska says that he "once had a visa issue which was immediately rectified" and "is not at all 'banned' from entering the U.S.," noting that he traveled to America last November to attend The Wall Street Journal's CEO forum.

The plaintiff, Uzbekistan-born Michael Cherney, will have to make his court appearances via video link from Israel, where he now lives. Interpol issued an arrest warrant for him in 2010 on allegations of money laundering, fraud and organized crime.

Last Friday morning, reams of documents filled the room-there were more than 800 binders of them packed against one wall alone. Binders stacked behind the judge, and cardboard boxes of them had been piled haphazardly between the teams for the plaintiff and defense, nearly obscuring Deripaska's high-priced super-lawyer, Thomas Beazley, from the back of the room. Beazley and the judge were wading through the puzzling provenance of an entity called the Siberian Investment Company. "It is a very complex picture, my Lord," Beazley said.

Despite all the documents, though, the case revolves around two pieces of paper that Cherney and Deripaska allegedly wrote up during a 2001 meeting at London's Lanesborough Hotel, one of the most expensive lodgings in the world. Cherney says the agreement guaranteed him a 20 percent stake in Rusal, the world's largest producer of aluminum. Deripaska says Cherney was a "life-long criminal" trying to extort him for protection money. Now it's up to the lawyers to try to figure things out.

Rupert D'Cruz, who is secretary of the British-Russian Law Association and is one of England's top experts on CIS cases, says the English courts, with their long history of settling complex international disputes, are uniquely suited to handle convoluted cases like the oligarchs battles, which are often based on handshake agreements-saunas are said to be the Russian equivalent to the golf course for sealing deals. "It's often done on trust," he says. "And when things go wrong there is a great problem of putting together the jigsaw of who said what, and what was agreed."

Unlike the civil law systems in much of Europe, England has an adversarial one like America's, where witnesses undergo lengthy cross-examination, making it less dependent on documents. "One of the skills involved is analyzing the credibility of witnesses as they appear before you, which is a particularly important feature of the CIS and Russian cases," D'Cruz says. English courts also have an intensive disclosure process, which can help with digging things up-and which also accomplishes the task of embarrassing a rival, often a seemingly central motivation in the oligarch cases.

Deripaska made his name during the so-called aluminum wars of the 1990s, as the metals industry roiled with competition, intrigue and murder. It was perhaps the most extreme example of a small group of businessmen, often with political connections, warring over Russia's newly privatized industries. "There was a great deal of what we called Wild West capitalism, and a great deal of what we called informal dispute resolution," says Bean, who practiced in Russia from 1995 to 2003. " They didn't go to the court, because the court could be bought." The Deripaska case, for example, has already mentioned accounts of gun battles and alleged extortion plans. "It was the law of the jungle, especially for the big guys," Bean says of 1990s Russia . "And these guys were the big guys."

The big guys often aren't used to playing nice, which can make things tough for lawyers. London CIS specialists report working on cases where they suspect the key documents are forged, and where clients have to be reminded that they can't try to buy the judge. Often they worry that their offices are bugged. Adam Greaves, a lawyer in London who has tried a long line of high-profile CIS cases, says he's had clients with bullet wounds and knife scars, including one who had an old wound running all the way up his neck. Cases have been filled with tales of things like illegal share dilutions and staged bankruptcies. "You've got to hand it to the Russians. They know how to develop a convoluted fraud," he says.

The oligarchs also are used to getting what they want, and not afraid to take grudges against their opponents as far as they can, sometimes happy to tarnish a rival's reputation even if it means hurting their own case. "They are generally extremely aggressive litigators. They don't take no for an answer," Greaves says. "They will litigate every point, including bad ones, and frequently against your advice-either to spill out information, or cause the other side grief, or make spurious or defamatory statements."

This can result in wide-ranging and explosive cases-and a lot of Russia's dirty laundry being aired. All the newfound attention on the oligarchs has turned into a black eye for the country, and also for Putin, who has been linked to many of them. There have even been rumblings that the Russian government is considering ways to stem the English legal tide. But London legal insiders hint that there are more show-stopping cases on the way. "The feeling right now is, watch this space," Shaw says.

Editor's note: An earlier version of this story incorrectly stated that Deripaska is banned from traveling to the U.S.